Market Talk
– The U.S. dollar was subdued on Tuesday ahead of testimony by Federal Reserve chair Jerome Powell, as investors awaited his testimony and jobs data due later this week for further indications on how much higher the U.S. central bank is likely to raise interest rates.
– Powell is likely to outline the path of interest rates in the coming months in his testimony before Congress and market will be watching for any new signals, given that while inflation unexpectedly rose in January, other economic indicators showed the U.S. economy was cooling.
– The Australian dollar declined to 0.6715 after Australia’s central bank raised its cash rate by 25 basis points to the highest in more than a decade at 3.60% on Tuesday. RBA said it expects further tightening will be needed to curb inflation but recent data suggested a lower risk of a cycle in which prices and wages chase one another.
– The euro was 0.03% lower at $1.0675, having risen nearly 0.5% overnight. Sterling was last trading at $1.2025. The Japanese yen weakened 0.15% to 136.14 per dollar ahead of the final policy meeting for Bank of Japan Governor Haruhiko Kuroda on Thursday and Friday.
– Gold prices kept to a tight range on Tuesday as markets hunkered down ahead of more cues on monetary policy from a testimony by Federal Reserve Chair Jerome Powell. Bullion was trading at $1847.50 per ounce while silver was last at $21.07.
Chart Focus XAU/USD – Gold
Key Points
1. Buy Gold recommendation.
2. Buy Gold at $1845.00. Stop at $1838.00 and profit target at $1870.00
3. The US dollar is likely to be weighed down by Powell’s disinflation comment and weak economic data.
4. A Rising Wedge chart pattern and MACD are hinting at a price rally.
Fundamental Comments
1. Fed Chair Powell is likely to stick to his disinflation comment, keeping the US weak.
2. US economic data are hinting at a slowdown in the US economy, weighing on the US dollar.
Technical Comments
1. Price could be forming a Rising Wedge chart pattern which is hinting at a rally in price.
2. MACD remains bullish and is hinting at a price rally.
Technical Overview
USD/JPY – After price reached a high at 137.09 last Thursday, price has been on a decline. There is an important support at 135.25. If price can stay above this support, we are likely to see another test of the 137.10 high. However, if price fails to hold above the support, price is likely to decline to a previous low at 134.60. Both MACD and 20EMA are hinting at a price decline but stochastic is hinting at a price rally
| Support | 135.60 | 135.25 | 134.60 |
| Resistance | 136.15 | 136.65 | 137.10 |
EUR/USD – Price has been moving in a narrow range since last Wednesday and today price is likely to test the upper end of its range. If price is able to move above the previous high of 1.0690, we are likely to see a continuation of the rally to 1.0790. However, failure to move above 1.0690 is likely to send price lower to 1.0575 in the next couple of days. Stochastic is hinting at a limited upside but both MACD and 20EMA are hinting at a price rally.
| Support | 1.0655 | 1.0610 | 1.0575 |
| Resistance | 1.0695 | 1.0730 | 1.0790 |
GBP/USD – After testing the low of 1.1915 on three different days, price has bounced up above the 20EMA and we are likely to see this rally continues towards the previous high at 1.2140. Stochastic is moving higher and hinting at a price rally, but the upside could be limited with stochastic inside the overbought zone. MACD and 20EMA are both hinting at a bullish price trend. A move below 1.1990 would negate our bullish view.
| Support | 1.1990 | 1.1960 | 1.1910 |
| Resistance | 1.2050 | 1.2090 | 1.2140 |
AUD/USD – Price looks like it will decline below the recent low at 0.6695, despite a hike of 25 basis points by the Reserve Bank of Australia. The RBA’s dovish comment actually sent price declining. Currently all 3 indicators, stochastic, MACD and 20EMA are hinting at a continuation of the price decline. We are likely to see a price decline to the next support level at 0.6620 in the next 24 hours.
| Support | 0.6685 | 0.6650 | 0.6620 |
| Resistance | 0.6730 | 0.6770 | 0.6805 |
NZD/USD – We had a buy recommendation yesterday at 0.6205, which was filled when price declined to a low of 0.6172. This was also just above our stop at 0.6170. Stochastic has a bullish crossover and is moving higher, hinting at a price rally. However both MACD and 20EMA are hinting at a bearish price trend. Our view remains unchanged and we would recommend keeping stop at 0.6170 and profit target at 0.6305.
| Support | 0.6170 | 0.6130 | 0.6095 |
| Resistance | 0.6215 | 0.6265 | 0.6310 |